A new plan has recently been worked out for rehabilitating Tokyo Electric Power Co. Holdings Inc. (TEPCO), the embattled operator of the crippled Fukushima No. 1 nuclear power plant.
The plan is centered on a bold management reform for enhancing the utility’s earning capacity so it can cover the ballooning expenses related to the Fukushima nuclear disaster of 2011, including the payment of damages and the cost of scrapping the hobbled nuclear reactors.
TEPCO obviously has the duty to fulfill its responsibility to the people and communities affected by the disaster. But the plan has set profit targets that are anything but easy to achieve, and some of the components of the plan appear unlikely to be realizable any time soon.
There is a need to continue reviewing the plan so it will not end up as simply pie in the sky.
TEPCO came under de facto government ownership after it could no longer keep operating on its own as a result of the Fukushima nuclear meltdowns. The utility has since been paying damages and otherwise dealing with the aftermath of the disaster while receiving aid in various forms under government supervision.
It was learned late last year that post-disaster processing would cost twice as much as the previous estimate. The government worked out a framework, wherein about 16 trillion yen ($141 billion), out of the total expense of some 22 trillion yen, would be covered either by TEPCO or with profits from the sale of the government’s share in TEPCO.
The rehabilitation plan, which was revised in response thereto, envisages that TEPCO can come up with 500 billion yen in necessary expenses annually over the coming three decades. It also sets the goal of substantially increasing TEPCO’s profits.
Many questions linger, however.
A restart of the idled Kashiwazaki-Kariwa nuclear power plant in Niigata Prefecture, which is expected to be the key instrument for TEPCO’s turnaround, is unlikely to be feasible any time soon. The governor of Niigata Prefecture and others are growing increasingly distrustful of TEPCO, as it recently came to light that the company had failed to inform the government’s Nuclear Regulation Authority that one key building on the nuclear plant site is not sufficiently anti-seismic.
The first order of business is to take thorough safety measures. TEPCO should come up with ways for generating the necessary financial resources without relying on a restart of the nuclear plant.
The centerpiece of new measures for enhancing TEPCO’s earning capacity is a prospective reorganization of its operations along segment lines, such as in the field of power transmission and distribution and in nuclear power operations, which would also involve other utilities. That apparently came against the backdrop of the industry ministry’s hopes that TEPCO’s realignment will trigger a reform of the entire energy industry.
Other major electric utilities, however, are wary of the risk of having to play a part in TEPCO’s response to the nuclear disaster. It therefore remains uncertain whether the reorganization will actually take place as envisaged.
The framework for sharing the burdens of post-disaster processing, which the government has worked out as a precondition for the new plan, is in the first place ridden with problems.
The framework envisages that new entrants to the power supply market, who operate no nuclear reactors, will also have to pay part of the disaster response costs. Critics continue to argue such a plan is about passing the bill on to irrelevant parties.
The 4 trillion yen in radioactive cleanup fees are designated for being covered by profits on the sale of TEPCO shares. But that plan could fail unless TEPCO’s earnings were to expand and its share price were to grow significantly.
Using taxpayers’ money to fill the hole would then emerge as a realistic option.
TEPCO was allowed to stay afloat at the expense of taxpayers on the sole grounds that it bears heavy responsibility to the people and communities affected by the Fukushima disaster.
The government would have to take another step forward if TEPCO were unable to fulfill that responsibility. That would also fuel the argument for dismantling the embattled utility.
TEPCO is expected to soon make a fresh start under a reshuffled management. The utility and the government should not forget about the exacting eyes of the public.